Question

In: Accounting

The following selected transactions were taken from the books of Ripley Company for Year 1: On...

The following selected transactions were taken from the books of Ripley Company for Year 1:
On February 1, Year 1, borrowed $47,000 cash from the local bank. The note had a 5 percent interest rate and was due on June 1, Year 1.

Cash sales for the year amounted to $245,000 plus sales tax at the rate of 6 percent.

Ripley provides a 90-day warranty on the merchandise sold. The warranty expense is estimated to be 4 percent of sales.

Paid the sales tax to the state sales tax agency on $180,000 of the sales.

Paid the note due on June 1 and the related interest.

On November 1, Year 1, borrowed $47,000 cash from the local bank. The note had a 9 percent interest rate and a one-year term to maturity.

Paid $3,700 in warranty repairs.

A customer has filed a lawsuit against Ripley for $130,000 for breach of contract. The company attorney does not believe the suit has merit.
Interest Payable Sales Tax Payable
Beg. Bal. Beg. Bal.
End. Bal. End. Bal.
Warranty Payable Notes Payable
Beg. Bal. Beg. Bal.
End. Bal. End. Bal.


Prepare the current liabilities section of the balance sheet at December 31, Year 1. (Round your answers nearest dollar amount.

RIPLEY COMPANY
Balance Sheet (partial)
As of December 31, Year 1
Current liabilities
Total current liabilities

Solutions

Expert Solution

Interest Payable Sales Tax Payable
Beg. Bal. 0 Beg. Bal. 0
705 6 14700 2
4 10800
End. Bal. 705 End. Bal. 3900
$47000 x 9% x 2/12 = $705 $245000 x 6% = $14700
$180000 x 6% = $10800
Warranty Payable Notes Payable
Beg. Bal. 0 Beg. Bal. 0
9800 3 47000 1
7 3700 5 47000 47000 6
End. Bal. 6100 End. Bal. 47000
$245000 x 4% = $9800

Note: Kindly re-confirm transaction numbers given in the t-accounts since the transactions provided in the question have not been numbered.

RIPLEY COMPANY
Balance Sheet (Partial)
As of December 31, Year 1
Current Liabilities
Interest payable 705
Sales tax payable 3900
Warranty payable 6100
Notes payable 47000
Total Current Liabilities 57705

The lawsuit filed against Ripley by a customer for $130000 for breach of contract should not be recorded since it is a contingent liability with probability of its occurrence being remote as the attorney believes the suit does not have merit.

ekkarill92 answered 2 years ago
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